The Mistakes.
A trusted employee of 12 years was promoted to account supervisor responsible for managing numerous client accounts. From the time of her promotion to the termination of her employment two years later, she had submitted and processed a number of payments to fictitious employees of her clients. The funds were transferred from the client to the insured’s operating account and then re-routed through several different banks into the supervisor’s personal accounts. The account supervisor deposited approximately $220,000 in fraudulent payments during this time. Once the transfers had been completed, the account supervisor would delete all record of payment from the insured’s system and credit the client’s account electronically covering her tracks. Audits eventually revealed the discrepancies but the damage had already been done.
The Consequences
- The insured’s crime coverage through a Business Owner’s Policy carried limits of only $10,000 and was subject to a $1,000 deductible.
- The insured was left to pay the balance of the $220,000 loss in addition to the deductible.
- At renewal, the carrier decided not to renew the account.
- Insured loss: $10,000
- Uninsured loss: $210,000
- Employee background checks should be conducted.
- Countersignatures on checks required.
- Procedures in place so that no one employee handles an account from start to finish.
The Avoidance
- Employee background checks should be conducted.
- Countersignatures on checks required.
- Procedures in place so that no one employee handles an account from start to finish.